Five reasons you should get legal advice before you sign your home building contract
1. The builder prepares the home building contract
Unless you have hired an architect to manage the home building contract for you, on most occasions the builder has prepared the building contract documents. Preparing the home building contract documents includes the picking the industry association standard form building contract, the specifications, the schedules and if the building contract is a design and build contract, the plans.
The builder understands the process and is going to use the documents to best look after its own interests, and that should be expected. The builder is in business and is not in the business of looking after your interests.
As a result unless you negotiate the home building contract, the builder is going to have all of the documents written in its favour. So if or when something goes wrong or there is a building dispute, you will have less options or none at all. By instructing a building lawyer with experience in this area, you will not only be able to negotiate the obvious terms in the home building contract that are one-sided, but you will be given an understanding of how the home building contract will work in reality.
2. Industry association building contracts
Industry association building contracts are written for the builder. They are not written for the homeowner. If you want your industry association contract to be truly fair, then certain conditions in the general terms would need to be amended.
Often builders will argue that because it is an industry standard form building contract, it can’t be changed. There is nothing that makes an industry association building contract so special that it cannot be changed and amended. If your builder refuses to change your home building contract on this basis, it does pose the question: What the builder will be like when there is a dispute? How flexible and understanding will the builder be then?
3. It is an investment
A building contract, even if it is for your home, is an investment often for many hundreds of thousands of dollars. When we buy a house, people think nothing of hiring a lawyer to review the sale and purchase documents, and fulfil the sale and purchase for us. Home building contracts are arguably more risky than real estate sale and purchase agreements and can involve as much if not more money than simply buying an existing home.
Think of your home building contract as a business investment. Would you make an investment for hundreds of thousands of dollars without getting a professional to look over the documents for you?
4. Inequality of bargaining power
The builder works in its industry every day. It understands the industry language, the industry processes and has the general terms of the home building contract written for it. On top of that it has written the specifications and the schedules to the building contract.
If you have no or little industry knowledge, the only way you will be able to even the inequality is by obtaining legal advice from a building lawyer.
If you are from the construction industry, please note that we have had numerous domestic building clients who in their professional lives are in the construction industry. Knowing how the industry works does not make you immune to the building disputes which may arise, the cost blow outs and the losses that can happen with domestic building.
5. It can save you money
If you can’t afford the building lawyer experts at the beginning of your build to make sure that the build goes according to plan, you won’t be able to afford the building lawyer experts when everything goes wrong.
Legal costs for pre-contract legal advice are small relative to the total cost of your home building project, but if a home building contract dispute occurs legal advice can cost thousands, if not tens of thousands of dollars.
There are a number of ways that legal advice can save you money. Sometimes the saving can be instantaneous, for example a miscalculation in QLevy, or GST. However, sometimes the saving relates to more significant issues that can cause disputes during the build. Examples of significant issues we have discovered in pre-contract building contract advice are:
provisional sums being used to keep the building contract price down, when everything needed to give a fixed price for the item was known;
significant work excluded from the building contract in the specifications, which the owner thought were included;
the entity responsible for earthworks and which owned the plans, was not a party to the building contract and was not properly identified in the building contract;
inconsistencies between the plans, specifications and the original building contract documents;
significant changes made to the plans and specifications without the homeowner’s knowledge, which would have caused significant cost and structural problems onsite; and
all homeowner legal rights being limited to 18 months after the build, apart from structural warranties that are required by law.
Contact Us
If you're wanting to follow through on any of the five reasons described above and get legal advice from a building lawyer before signing your home building contract, feel free to call our office on 07 3128 0120 or email us at homeowners@arbuildinglaw.com.au to speak with one of our team's building lawyers.
